Doing business with Filotimo on Wall Street: Michael Psaros of KPS Capital Partners

It took a young Greek of the old school to make filotimo a business model and a kid brought up in the steel mills of West Virginia to co-found a Wall Street private equity firm that has resurrected over 50 manufacturing companies ranging from the glamorous (Waterford Wedgwood) to the essential (Chassis Brakes International) and in the process saved nearly forty thousand jobs and the communities dependent on them.

“There is nothing more important than your reputation—to onoma,” says Michael Psaros, 47, co-founder and managing partner of KPS Capital Partners in New York City, but in his heart still a kid from Weirton, West Virginia and the All Saints parish. “What I owe to my family, and the All Saints community, is that they taught me filotimo. And if you run that parallel directly to my business at KPS, we are a firm that has a value system. We are a firm that understands we have obligations, and there’s nothing more important to our firm than our professional reputation—to onoma mas.”

In fact, he had a baby at home and a computer next to the crib where he typed up the mission statement of the fledgling firm to “invest in industrial and manufacturing companies for purposes of turning them around and doing it in a constructive and positive sense and in the right way versus the wrong way.”

“We are truly a unique firm,” says Psaros, speaking with the precise diction he says his Yiayia Evgenia taught him standing in front of the “icebox” back in Weirton. “We are first and foremost manufacturers that happen to have a very large pool of capital that allows us to do what we do.”

What KPS has done for over twenty years with spot-on success is invest me to mati in troubled manufacturers both here and abroad and then work in partnership–and not at loggerheads–with unions to turn the companies around and produce what he calls a “win-win-win” of companies being given a fresh start instead of shutting down, towns being given fresh hope instead of losing jobs and their tax base, and investors seeing record profits so the clamor to join the KPS capital pool keeps growing (the company put out a $3 billion fund and got nearly $10 billion in orders in only 10 weeks).

“I am a long-term bull on manufacturing in the United States,” says Psaros. “As evidenced by our fundraising success, investing in manufacturing is better than investing in consumer products, investing in telecom, investing in the technology sector.”

He claims that the Rust Belt is no longer rusting but in fact “re-industrializing” and that America is becoming a “hydrocarbon superpower.”

“Prior to the recent collapse in oil prices, America was on track this year to pump more oil than Saudi Arabia,” he says. “And America has been blessed with natural gas resources that are resident in very few places of the world. One of the most important components of manufacturing is energy costs and there is nowhere else where energy costs, labor, and technology come together better than in the United States.”

And from its track record no firm is better at putting together the “win-win-win” scenario than KPS—which not only has the capital and street cred to fashion a deal, but the filotimo to earn the trust of all the parties involved, including the unions with the jobs of their members on the line.

“The unions trust us and believe us because we have always told the truth,” says Psaros. “We treat them as parties with standing and we treat them with respect and that’s why we have the credentials that no other private equity firm in the world has in working with the large unions.”

Addressing the Hellenic American Bankers Association’s annual event where he was honored with the Executive of the Year Award

In the numbers game on Wall Street the firm has cred because the returns it brings to investors are often epic. Most recently one of its holdings, Global Brass and Copper located in Schaumburg, Illinois and acquired by KPS in the recession of 2007, has seen a $650 million return to investors since 2010, including over $500 million in profit. The deal for Waupaca Foundry that KPS managing partner David Shapiro engineered brought in over $1.15 billion, including a $900 million profit, in only 27 months.

Which is why KPS has the unheard-of luxury for a private equity firm of having more suitors than it wants.

“I think it’s important for you to understand that we have turned down more capital than we closed on,” says Psaros. “We’re very conservative and we are real professional investors–we are not asset managers. And that makes us stand apart. If you think about it, we have essentially closed, through the four funds we have, on $6 billion. But we have walked away from, or turned down, more than another $6 billion. That is very unusual for a Wall Street firm to do.”

He credits the firm’s success in typical Psaros fashion to his “family” of partners, starting with Eugene Keilin (who engineered the rescue of Weirton Steel that inspired Psaros to get into the business), and currently includes Shapiro (“our 24th year together”), Raquel Palmer (“our 20th year together”), and Jay Bernstein (“our 16th year together”): “They are like family. It is not a professional collaboration. It’s something far more familiar, far more personal that we have. We’ve been together for more than two decades and everything about us is about making money by making businesses better. And it comes from our collective experience and our collective judgment and our collective confidence in our ability to execute. We have what we would say in Greek to mati—the eye for value.”

At the Hellenic Times Scholarship Fund Gala where he received the Humanitarian Award

And sometimes you get to work with another Greek who has to mati: a business legend in his own right named George Thanopoulous, who Psaros met in 2005 at the Detroit Auto Show during a bone-cold Midwestern winter.

“You had to be there when I told my wife, Robin, a New York girl, that we were going to the Detroit Auto Show in January for a black-tie affair and she had to wear a gown,” Psaros remembers. “But it was one of the great days of my life.”

In front of a Jeep Liberty, he got to meet Thanopoulos, the “Michelangelo of the auto parts business on the metal side,” who became not only a business partner but, says Psaros, “my adelfo in every sense of the word–my brother.”

Thanopoulos, roughly the same age as Psaros and an immigrant from Crete, was already a phenom in the business and Psaros invited him to New York for dinner and some brainstorming at the New York restaurant Avra.

“And George said, look, you have the capital, the turnaround experience, the union relationships, and I’m the best guy in automotive parts,” Psaros recalls. “He said we’re not going to do a deal. We are going to transform and consolidate an entire industry in North America. At the time, we were a $400 million dollar firm and all the big funds wanted to work with him. But his parents, immigrants, metanestes, who don’t speak English very well, and I love them, they said to him, Na pas me ton Elina.”

So together the two Greeks in six years accomplished what the trade publication Private Equity International called “the turnaround of the year globally in private equity.”

“What we did is we acquired five companies primarily in the automotive forging industry,” Psaros explains. “Four of the five were in bankruptcy, four of the five would have liquidated, four of the five were cash-flow negative, not just unprofitable, four of the five either didn’t have management, or had terrible management. And we bought the first business at or near liquidation value. We turned that business around basically in the year; we then bought the next business at or below liquidation value, turned it around, and integrated it with the first; and we did this five times.”

The result was a groundbreaking win-win-win.

“It was a win for labor and working people. It was a win for the communities where we operated. It was a win for our management team. And it was a win for our investors. To this day George and I refer to ourselves as, Dio horiates—thafmasou ti kaname! (Two hicks—imagine what we accomplished!) We created a company that we sold, resulting in a $870 million cash distribution to stockholders representing over an $800 million profit. We saved 3,000 premium manufacturing jobs in the United States. We saved 15 plants in the 15 communities that needed those plants. We worked in partnership with the United Steelworkers and United Auto Workers and the union UNITE. And our management team is now independently wealthy and our investors are obviously very happy. But through this journey you had two Greeks speaking a common language, you had a common culture, you had a trust between two men that could finish each other’s sentences, and it’s so beautiful how my team at KPS, my guys, that work with us, were able to witness the magic of this partnership.”

Except Thanopoulos’ parents were not convinced when it came time to sell the company.

“George tells his parents that we’re now going to sell the company. He tells his parents that he’s going to become an independently-wealthy man from selling the company. And you know what they ask him? Are you going to have a job? And he said yes I am. I am going to continue to run the company after we sell it. And they said we want to talk to Mike. And I get on the phone with them, because now they’re worried about me. And they said to me—Ma eheis spiti? (Do you have a house?) They’re worried: What’s Mike going to do? Now my parents are not immigrants: my parents between them have five college degrees, okay? So I tell them the story about how we sold the company and made a $800 million profit and George will become a wealthy man. And you know what they say to me? That’s nice, but is he going to have a job?”

The concern is a Greek immigrant thing, and Psaros witnessed it firsthand himself being born and raised in a steel town mostly made up of ethnics relying on the local plant for their living.

“Here’s the math: there are 20,000 people in the town and 10,000 people worked in the mill. Our town was an immigrant town: Greeks, Italians, Slovaks, Slovenians, Russians, Ukrainians. Hard-working people, immigrant people, and it was our home. It’s still my home: I’m a very proud member, very proud member, of the All Saints Church. My cousin Nick Latousakis is the parish council president and he’s an amazing guy. I’ve been in New York for 25 years, I lived in West Virginia for 18, but my soul, my heart, will always be in West Virginia; and the Greek church was the center of our world. All Saints is a spectacular Byzantine jewel with a deeply-committed community and we are currently building an annex to enlarge the church. In this church, this church–I get choked up when I talk about this church–from my earliest years at that community I was made to understand what it meant to be an American of Hellenic descent. I knew exactly where I came from and having a sense of place is very powerful. I was raised with the traditions and the respect found in every Greek family, along with the accompanying obligations and expectations. And I carry that value system with me every day because I understand that what I do reflects not only on me and my family but also on the entire Hellenic community. There is nothing more important than your reputation—to onoma.”

It was a lesson taught by his parents—his father George was an executive at Weirton Steel: “I never knew anybody who worked as hard as my dad—coping with the dirt, the heat, the hours, the responsibility.” And by his mother Mary Ann, who was a teacher: “Much like her mother, she’s the most selfless person I know. She gets up every day and thinks what can she do for somebody else?”

But it was also a lesson taught through word and deed by those larger-than-life figures in his life: his grandfather Mike, who worked until he was 86, and his grandmother Evgenia.

“My papou was and is the giant of my life–and I’m just looking at his picture right now,” says Psaros. “He was a refugee from the Great Catastrophe in Asia Minor.”

In his legendary wanderings like Sinbad, Papou Mike was orphaned at four or five and made it to the island of Kos, before he followed a brother to Marseilles, before he joined the British merchant marine during World War I and was assigned to a hospital ship that made him see the world, before he followed another brother to America “and he literally jumped into Baltimore harbor and swam to America: he always used to tell me the first thing he did was go to the post office to register to become a legal alien.”

“I saw the world through his eyes,” says Psaros. “And though my papou wasn’t educated, he was a voracious reader and I would sit there as a child and he would lecture me, and really he gave me a profound appreciation of history and politics and of the world. And the other thing is he taught me how to be a man. He was a man’s man in every sense of the word. He taught me respect: he didn’t teach me respect, he demanded respect.”

His Yiayia Evgenia, an immigrant from Olympi, Chios, one of the fabled mastic villages, got pulled out of school in the third grade when she lost the family goat but also remained a voracious reader enamored of the Greek heroic poems.

“If she had been born in the United States today she would’ve been at a major university, a major published author, a poet,” her grandson says proudly. “My grandfather taught me history and she taught me the beauty of the written and spoken word. A lot of people ask me how can you stand up and speak extemporaneously in front of five or 10,000 people without any fear and the answer is very simple: my grandmother had a refrigerator, which was an International Harvester–that’s how old it was–she would refer to it as the ‘icebox’—and she would make me stand in front of it and practice over and over and over again my diction–enunciation, elocution, breathing, posture—prosfora. The impact on me between the two of them and the love was amazing.”

Michael Psaros with his wife, Robin

Psaros met his wife Robin in New York and with typical enthusiasm decided on a first date that she was the woman he would marry. Only she wore a “swing coat” without buttons in the middle of winter. And when he told the family back home about it, Papou Mike was stumped: “Let me get this straight: you, my grandson, want to marry a girl that was wearing a winter coat that didn’t have buttons?”

Two years later he brought her home to seal the deal: “You have to picture this: my parents have a split-level home. The lower floor has a hallway that’s 90 feet long. And every member of my family is lined up waiting to meet this girl and my papou is right up front. And so the door opens and this poor girl looks in on 90 feet of Greeks, most of whom are crying.”

She got a hug and a blessing from Papou Mike (and all the relatives down the receiving line) and the couple have now been married twenty years and have three children: Alexandra, Leonidas, and Marina. “She is my inspiration,” says Psaros. “She brought poetry and eloquence into my life.” Robin’s maiden name was Goldberg and Psaros says the wedding was epic: “You have two cultures that are both 5,000 years old, and that put family and tradition above all, and where men dance with each other and it’s okay. It was the greatest wedding ever.”

His brother Harry and sister-in-law Michelle still live in Pennsylvania with their sons Gus and Maximos only minutes from Weirton, and Psaros still has a home there and in Purchase, New York, where the family is active in the Church of Our Savior in Rye, NY, and Psaros himself is a member of the Leadership 100 and a guest speaker this year at the Leadership conference. He also considers it “an incredible and rare honor and achievement” to be inducted an Archon.

At his investiture as Archon

“I was deeply humbled by that,” he says. “Leadership 100 does extraordinary things for Orthodoxy and the Hellenic community. I look forward to the conference in Orlando: my parents will be there, my brother’s family will be there, and to be recognized by an organization that does so much good is just humbling. But it’s not just recognizing me: it’s recognizing my family, the church in Rye, the church back home in West Virginia, my whole family. I’m just very excited.”

And in what he calls one of the proudest moments of his life, “a transcendent moment,” he was at the consecration of the new St. Nicholas Church at Ground Zero.

“Being one of the 20 or 24 parties that have the privilege of laying one of the cornerstones was the most extraordinary, transcendent, and humbling experiences,” he says. “This church when constructed, New York City estimates, will have over 10 million visitors a year. It is the biggest thing that’s happened in Orthodoxy in my lifetime. And to be a participant–forget about any of these deals that we discussed–this is what matters. It was one of the biggest moments of my life, it really was.”